Correlation Between Spectrum International and Spectrum Growth

Can any of the company-specific risk be diversified away by investing in both Spectrum International and Spectrum Growth at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Spectrum International and Spectrum Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Spectrum International Fund and Spectrum Growth Fund, you can compare the effects of market volatilities on Spectrum International and Spectrum Growth and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Spectrum International with a short position of Spectrum Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spectrum International and Spectrum Growth.

Diversification Opportunities for Spectrum International and Spectrum Growth

0.24

Correlation Coefficient

Spectrum International  Spectrum Growth

Modest diversification

The 3 months correlation between Spectrum and Spectrum is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum International Fund and Spectrum Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Growth and Spectrum International is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Spectrum International Fund are associated (or correlated) with Spectrum Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Growth has no effect on the direction of Spectrum International i.e., Spectrum International and Spectrum Growth go up and down completely randomly.

Pair Corralation between Spectrum International and Spectrum Growth

Assuming the 90 days horizon Spectrum International Fund is expected to generate 0.8 times more return on investment than Spectrum Growth. However, Spectrum International Fund is 1.25 times less risky than Spectrum Growth. It trades about 0.08 of its potential returns per unit of risk. Spectrum Growth Fund is currently generating about -0.13 per unit of risk. If you would invest  1,449  in Spectrum International Fund on December 1, 2024 and sell it today you would earn a total of  54.00  from holding Spectrum International Fund or generate 3.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Spectrum International Fund  vs.  Spectrum Growth Fund

Spectrum International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Spectrum International Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Spectrum International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Spectrum Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spectrum Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Spectrum International and Spectrum Growth

The main advantage of trading using opposite Spectrum International and Spectrum Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spectrum International position performs unexpectedly, Spectrum Growth can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Spectrum Growth will offset losses from the drop in Spectrum Growth's long position.

The idea behind Spectrum International Fund and Spectrum Growth Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.